The public sector must not be exempt from the cuts

If the nation must make sacrifices, the public sector should not expect to remain exempt. When individuals and businesses are drilling new holes in their belts, quangocrats ought not to be seen to be loosening theirs.

As the cash runs out, we learn that GPs in England have had 58 per cent pay rises under the new NHS contracts. This is what "investing in the NHS" means. If you offer people more money for working shorter hours they will, quite rationally, work shorter hours.

Yet Labour shows little appetite for curbing the state payroll. And even if ministers wanted to, they would soon find, like the Sorcerer's Apprentice, that the state machine was beyond their command. Civil servants create new task forces, new commissions, new advisory bodies. One bureaucracy begets another, just as Asimov's robots had learned to programme one another without human intervention.

To take just one example, several local councils may lose money because they had invested in Icesave. They are now demanding that the taxpayer bail them out. But why not try to recoup some of that money from the officials who made those investment decisions in the first place, most of whom are on six-figure salaries? Why not cut their pay, or even cut their numbers? The answer, of course, is that local councils now exist chiefly for the benefit of their employees. With no connection between taxation, representation and expenditure at local level (75 per cent of local authority money comes from Whitehall), no one has much incentive to reduce expenditure.

Can anything be done? Yes. We can replace the quango state, which is structurally biased towards high spending, with localism: a system that encourages tax competition, fiscal prudence and downward pressure on rates. To see how to do it, read my book.

It will be tough, though. The dismissal of otiose functionaries will be referred to in the press as "cuts to vital services". Disbanding the various advisory quangos, with their liaison units and their Strategy Plans, their racism awareness instructors and their gender mainstreaming officers, will be called "taking money from schools and hospitals". You can be sure that, when the rest of the population is reduced to riding the freight-trains, hobo-like, the quangocrats will still be there, emailing each other their memos, and occasionally suing each other for discrimination. They will be the last to feel the pain. But they will feel it in the end.